In researching a major case for a client and friend in South Carolina, I was forwarded this great pleading from a great law firm in the South that is as instructional as it is informational about Citi and other lenders and the accounting and transfer schemes they promulgated.

Remember what I have always said! “Its the accounting dummy!!!”

Nye

In RE: CITIGROUP INC. SECURITIES LITIGATION

Excerpt:

Plaintiffs, by and through their undersigned counsel, on behalf of themselves and aclass of investors (the “class”) who acquired Citigroup Inc. (“Citigroup”) common stock during theperiod beginning January 1, 2004 through and including January 15, 2009 (the “class period”), allegethe following for their class action complaint (the “complaint”) for violations of the SecuritiesExchange Act of 1934 (“Exchange Act”). These allegations are based on personal knowledge as toplaintiffs’ own acts, and are based upon information and belief as to all other matters alleged herein.

Plaintiffs’ information and belief is based upon, inter alia, the investigation bycounsel into the facts and circumstances alleged herein including without limitation review andanalysis of: (1) press releases, public statements, news articles and other publications disseminatedby or concerning Citigroup and the other defendants named herein; (2) Citigroup’s analystconference calls and conference presentations, and corresponding transcripts thereof; (3) the filingsthat Citigroup and related parties made with the Securities and Exchange Commission (the “SEC”),the London Stock Exchange (“LSE”), and the Irish Financial Services Regulatory Authority; (4)securities analysts’ reports concerning Citigroup and its operations; (5) analyses, presentations,reports and other published materials, concerning Collateralized Debt Obligations (“CDOs”),Residential Mortgage-Backed Securities (“RMBS”), Structured Investment Vehicles (“SIVs”), andthe U.S. mortgage markets authored, inter alia, by investment banks, credit rating agencies, expertmarket practitioners, academic experts, and various governmental/regulatory organizations; (6)Congressional testimony concerning CDOs, RMBS, SIVs and the U.S. mortgage markets; and (7)interviews with dozens of former employees of Citigroup and its operating subsidiaries. Manyadditional facts supporting the allegations herein are known only to the defendants and/or are withintheir exclusive custody and control. Plaintiffs believe that additional evidentiary support for theallegations herein will emerge after a reasonable opportunity to conduct discovery.

INTRODUCTION 1. This complaint concerns Citigroup’s practices with respect to mortgages and mortgage-related securities, including principally a class of securities known as Collateralized Debt Obligations, or “CDOs”. The complaint also concerns Citigroup’s practices with respect to auction rate securities, leveraged loans, and special investment vehicles (“SIVs”). This action does not complain of lack of foresight. It does not depend at all on Citigroup’s poor investment decisions. The complaint arises because Citigroup responded to the widely-known financial crisis by concealing both the extent of its ownership of toxic assets – most prominently, CDOs backed by nonprime mortgages – and the risks associated with them. Defendants omitted to disclose the existence or acknowledge the market value of or risks associated with tens of billions of dollars of financial instruments. In addition to the conventional failures of disclosure, Citigroup concealed the true facts by the use of shamelessly fraudulent schemes that had the effect of creating the false impressions that sales had been made when they had not been, and that risks had been eliminated, spread or hedged when they had not been.

2. During the class period, Citigroup’s public statements and financial statements created an impression of a state of financial affairs that differed materially from what actually existed. During the class period, Citigroup issued a stream of false positives – revenue growth, earnings growth, improved returns on capital and returns on risk, and strong capitalization ratios speaking to the company’s fundamental financial condition. Citigroup knew, concealed or distorted these representations by concealing or distorting its possession of these securities, their associated values, and risks. How did defendants accomplish this?